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Fair Value Measurements
12 Months Ended
Dec. 31, 2013
Fair Value Disclosures [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
    
Financial assets and financial liabilities measured at fair value on a recurring basis are as follows:
 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2013
Balance
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Investment securities available-for-sale:
 
 
 
 
Obligations of U.S. government agencies
$
763,238

$

$
763,238

$

U.S. agency mortgage-backed securities & collateralized mortgage obligations
1,184,053


1,184,053


Private mortgage-backed securities
415


415


Mortgage servicing rights
25,698


25,698


 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2012
Balance
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Investment securities available-for-sale:
 
 
 
 
Obligations of U.S. government agencies
$
754,856

$

$
754,856

$

U.S. agency mortgage-backed securities & collateralized mortgage obligations
1,239,851


1,239,851


Private mortgage-backed securities
551


551


Mortgage servicing rights
16,373


16,373




During the twelve months ended December 31, 2012, the Company remitted all cash payments due under a derivative liability contract, which was measured at fair value on a recurring basis using significant unobservable (Level 3) inputs. No additional amounts were due under the derivative liability contract as of December 31, 2013 or 2012.
    
The methodologies used by the Company in determining the fair values of each class of financial instruments are based primarily on the use of independent, market-based data to reflect a value that would be reasonably expected in an orderly transaction between market participants at the measurement date. The Company obtains fair value measurements for investment securities from an independent pricing service and evaluates mortgage servicing rights for impairment using an independent valuation service. The vendors chosen by the Company are widely recognized vendors whose evaluations support the pricing functions of financial institutions, investment and mutual funds, and portfolio managers. The Company has documented and evaluated the pricing methodologies used by the vendors and maintains internal processes that regularly test valuations. These internal processes include obtaining and reviewing available reports on internal controls, evaluating the prices for reasonableness given market changes, obtaining and evaluating the inputs used in the model for a sample of securities, investigating anomalies and confirming determinations through discussions with the vendor. For investment securities, if needed, a broker may be utilized to determine the reported fair value. Further details on the methods used to estimate the fair value of each class of financial instruments above are discussed below:

Investment Securities Available-for-Sale. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the investment's terms and conditions, among other things.

Mortgage Servicing Rights. Mortgage servicing rights are initially recorded at fair value based on comparable market quotes and are amortized in proportion to and over the period of estimated net servicing income. Mortgage servicing rights are evaluated quarterly for impairment using an independent valuation service. The valuation service utilizes discounted cash flow modeling techniques, which consider observable data that includes market consensus prepayment speeds and the predominant risk characteristics of the underlying loans including loan type, note rate and loan term. Management believes the significant inputs utilized in the valuation model are observable in the market.
   
Additionally, from time to time, certain assets are measured at fair value on a non-recurring basis. Adjustments to fair value generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment.

The following table presents information about the Company’s assets and liabilities measured at fair value on a non-recurring basis.
 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2013
Total
Quoted Prices
in Active
Markets for
Identical Assets (Level 1)
Significant
Other
Observable
Inputs
 (Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Gains (Losses)
Impaired loans
$
57,302

$

$

$
57,302

$
(23,224
)
Other real estate owned
8,502



8,502

(14,441
)
Long-lived assets to be disposed of by sale
1,186



1,186

(599
)

 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2012
Total
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Gains (Losses)
Impaired loans
$
74,623

$

$

$
74,623

$
(32,624
)
Other real estate owned
15,745



15,745

(20,797
)
Long-lived assets to be disposed of by sale
496



496

(70
)


Impaired Loans. Collateralized impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from collateral. The impaired loans are reported at fair value through specific valuation allowance allocations. In addition, when it is determined that the fair value of an impaired loan is less than the recorded investment in the loan, the carrying value of the loan is adjusted to fair value through a charge to the allowance for loan losses. Collateral values are estimated using independent appraisals and management estimates of current market conditions. As of December 31, 2013, certain impaired loans with a carrying value of $80,526 were reduced by specific valuation allowance allocations of $8,929 and partial loan charge-offs of $14,295 resulting in a reported fair value of $57,302. As of December 31, 2012, certain impaired loans with a carrying value of $107,247 were reduced by specific valuation allowance allocations of $10,297 and partial loan charge-offs of $22,327 resulting in a reported fair value of $74,623.

OREO. The fair values of OREO are estimated using independent appraisals and management estimates of current market conditions. Upon initial recognition, write-downs based on the foreclosed asset's fair value at foreclosure are reported through charges to the allowance for loan losses. Periodically, the fair value of foreclosed assets is remeasured with any subsequent write-downs charged to OREO expense in the period in which they are identified.

Long-lived Assets to be Disposed of by Sale. Long-lived assets to be disposed of by sale are carried at the lower of carrying value or fair value less estimated costs to sell. The fair values of long-lived assets to be disposed of by sale are based upon observable market data and management estimates of current market conditions. As of December 31, 2013, long-lived assets to be disposed of by sale with carrying values of $1,785 that were reduced by write-downs of $599 charged to other expense resulting in a reported fair value of $1,186. As of December 31, 2012, the Company had long-lived assets to be disposed of by sale of $566 that were reduced by write-downs of $70 charged to other expense resulting in a reported fair value of $496.

In addition, mortgage loans held for sale are required to be measured at the lower of cost or fair value. The fair value of mortgage loans held for sale is based upon binding contracts or quotes or bids from third party investors. As of December 31, 2013 and 2012, all mortgage loans held for sale were recorded at cost.

The Company is required to disclose the fair value of financial instruments for which it is practical to estimate fair value. The methodologies for estimating the fair value of financial instruments that are measured at fair value on a recurring or non-recurring basis are discussed above. The methodologies for estimating the fair value of other financial instruments are discussed below. For financial instruments bearing a variable interest rate where no credit risk exists, it is presumed that recorded book values are reasonable estimates of fair value.

Financial Assets. Carrying values of cash, cash equivalents and accrued interest receivable approximate fair values due to the liquid and/or short-term nature of these instruments. Fair values for investment securities held-to-maturity are obtained from an independent pricing service, which considers observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the investment’s terms and conditions, among other things. Fair values of fixed rate loans and variable rate loans that reprice on an infrequent basis are estimated by discounting future cash flows using current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality. Carrying values of variable rate loans that reprice frequently, and with no change in credit risk, approximate the fair values of these instruments.

Financial Liabilities. The fair values of demand deposits, savings accounts, securities sold under repurchase agreements and accrued interest payable are the amounts payable on demand at the reporting date. The fair values of fixed-maturity certificates of deposit are estimated using external market rates currently offered for deposits with similar remaining maturities. The carrying values of the interest bearing demand notes to the United States Treasury are deemed an approximation of fair values due to the frequent repayment and repricing at market rates. The floating rate subordinated debenture, floating rate subordinated term loan, notes payable to the FHLB, fixed rate subordinated term debt, fixed rate subordinated debentures and capital lease obligation are estimated by discounting future cash flows using current rates for advances with similar characteristics. The carrying value of the preferred stock pending redemption approximates fair value due to the short-term nature of this instrument.

Commitments to Extend Credit and Standby Letters of Credit. The fair value of commitments to extend credit and standby letters of credit, based on fees currently charged to enter into similar agreements, is not significant.

A summary of the estimated fair values of financial instruments follows:
 
`
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2013
Carrying Amount
Estimated
Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial assets:
 
 
 
 
 

Cash and cash equivalents
$
534,827

$
534,827

$

$
534,827

$

Investment securities available-for-sale
1,947,706

1,947,706


1,947,706


Investment securities held-to-maturity
203,837

205,926


205,926


Accrued interest receivable
26,450

26,450


26,450


Mortgage servicing rights, net
13,546

25,698


25,698


Net loans
4,259,514

4,246,539


4,189,237

57,302

Total financial assets
$
6,985,880

$
6,987,146

$

$
6,929,844

$
57,302

 
 
 
 
 
 
Financial liabilities:
 
 
 
 
 
Total deposits, excluding time deposits
$
4,943,033

$
4,943,033

$

$
4,943,033

$

Time deposits
1,190,717

1,196,250


1,196,250


Securities sold under repurchase agreements
457,437

457,437


457,437


Other borrowed funds
3

3


3


Accrued interest payable
4,963

4,963


4,963


Long-term debt
36,917

34,508


34,508


Subordinated debentures held by subsidiary trusts
82,477

72,045


72,045


Total financial liabilities
$
6,715,547

$
6,708,239

$

$
6,708,239

$



 
 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2012
Carrying Amount
Estimated
Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial assets:
 
 
 
 
 
Cash and cash equivalents
$
801,332

$
801,332

$

$
801,332

$

Investment securities available-for-sale
1,995,258

1,995,258


1,995,258


Investment securities held-to-maturity
208,223

218,933


218,933


Accrued interest receivable
28,869

28,869


28,869


Mortgage servicing rights, net
12,653

16,373


16,373


Net loans
4,123,401

4,142,426


4,067,803

74,623

Total financial assets
$
7,169,736

$
7,203,191

$

$
7,128,568

$
74,623

 
 
 
 
 
 
Financial liabilities:
 
 
 
 
 
Total deposits, excluding time deposits
$
4,854,927

$
4,854,927

$

$
4,854,927

$

Time deposits
1,385,484

1,394,403


1,394,403


Securities sold under repurchase agreements
505,785

505,785


505,785


Other borrowed funds
32

32


32


Accrued interest payable
6,502

6,502


6,502


Long-term debt
37,160

35,104


35,104


Preferred stock pending redemption
50,000

50,000


50,000


Subordinated debentures held by subsidiary trusts
82,477

62,409


62,409


Total financial liabilities
$
6,922,367

$
6,909,162

$

$
6,909,162

$